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Mr. Geoffrey J Bannister, Mr. Jarkko Turunen, and Malin Gardberg
Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.
Mr. Geoffrey J Bannister, Mr. Jarkko Turunen, and Malin Gardberg

Front Matter Page Asia and Pacific Department Contents Abstract I. INTRODUCTION II. LITERATURE AND THEORY III. MEASURING DOLLARIZATION AND FINANCIAL DEVELOPMENT IV. METHOD Policy variables in P Structural variables in S Dollarization variables in D Estimation strategy V. RESULTS Financial Depth Financial Access and Efficiency Robustness VI. CONCLUSION VII. REFERENCES TABLES 1. The Impact of Dollarization on Financial Debt 2. Dollarization and Financial Development in Countries with a History of High

Mr. Irineu E de Carvalho Filho
This paper appraises how countries with inflation targeting fared during the current crisis, with the goal of establishing the stylized facts that will guide and motivate future research. We find that since August 2008, IT countries lowered nominal policy rates by more and this loosening translated into an even larger differential in real interest rates relative to other countries; were less likely to face deflation scares; and saw sharp real depreciations not associated with a greater perception of risk by markets. We also find some weak evidence that IT countries did better on unemployment rates and advanced IT countries have had relatively stronger industrial production performance. Finally, we find that advanced IT countries had higher GDP growth rates than their non-IT peers, but find no such difference for emerging countries or the full sample.
Mr. Irineu E de Carvalho Filho

O ≡ λ t ( 3 ) Equation 1 can be estimated with OLS, thereby capturing a notion of a mean IT effect or using median (quantile) regression, measuring the effect of IT on the median IT country relative to the median country adopting other monetary policy framework. Then we can examine the coefficients of time dummies (with standard error bands) and the coefficients of the IT – time dummies interactions against time. Our full sample excludes countries for which nominal GDP in dollars (variable ngdpd in the WEO) in

Jacques R. Artus

the Deutsche Bundesbank , various issues. This series was deflated by the German consumer price index. C onsumer price indices , P G , P i , P F , P C Quarterly data on each country’s consumer price index were obtained from the Fund publication, International Financial Statistics , various issues. Variables P G and P i were defined, respectively, as consumer price indices of Germany and of country i , with prices expressed in U.S. dollars. Variables P F and P C were defined as P F = Σ i M Gi

Mr. Rabah Arezki

important vehicle of the resource curse hypothesis. In other words, the externality stemming from the resource sector to the nonresource sector is mainly conveyed through government spending, chiefly financed by resource-sector-related government revenues. Table 9.1 . (Millions of U.S. dollars) Variables (1) (2) (3) (4) (5) Long-Run Coefficients Initial GDP -0.089 -0.051 -0.074 -0.107 -0.061 0.006 0.004 0.006 0.006 0.006 Δ Resource Windfall -1.082 -0.804 5.399 -0.160 0

International Monetary Fund

established that the variables could be characterized as I(1) processes. 16 Cointegration and error correction 113. Since the variables in the model are I(1) and endogenous, we expect that the dollarization variable will be cointegrated with the variables on the right-hand side of equation (5) . The long-term relationship corresponds to the cointegrating relationship(s), while the short-term dynamics—i.e. the error correction model—return the variables to equilibrium after a shock. 17 The maximum likelihood technique of Johansen and Juselius (1990) is used to

Christian Saborowski and Mr. Sebastian Weber

concentration, the NPL ratio, the regulatory quality index, the inflation rate, the exchange rate regime variable, the loan dollarization variable, the credit to GDP ratio and the liquid reserves to total assets ratio. 23 The impulse response functions are evaluated at the 20 th and 80 th percentiles of the distributions of each respective country characteristic while holding the other variables constant at their median. The joint inclusion of these eight variables implies a significant reduction in the number of observations in the sample and a substantial loss of

Christian Saborowski and Mr. Sebastian Weber
We employ a structural panel VAR model with interaction terms to identify determinants of effective transmission from central bank policy rates to retail lending rates in a large country sample. The framework allows deriving country specific pass-through estimates broken down into the contributions of structural country characteristics and policies. The findings suggest that industrial economies tend to enjoy a higher pass-through largely on account of their more flexible exchange rate regimes and their more developed financial systems. The average pass-through in our sample increased from 30 to 60 percent between 2003 and 2008, mainly due to positive risk sentiment, rising inflation and increasingly diversified banking sectors. The crisis reversed this trend partly as banks increased precautionary liquidity holdings, non-performing loans proliferated and inflation moderated.